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  • Zasco van Rooyen

As a Buyer - Why do you need a DUE DILIGENCE condition in your Contract?

When buying a property, whether there is a house on the land or not… a Buyer needs to do an investigation (“searches”) on the property to ensure the property is not negatively affected by any issue which may otherwise make a Buyer not want to buy the property.

These searches are generally referred to as DUE DILIGENCE searches / investigations.

If a contract is not made subject to satisfactory DUE DILIGENCE search results at the discretion of the Buyer the Buyer is bound to complete the Contract regardless of negative search results. In other words, a Buyer may have bought a ‘dud’ and there is not much which he or she may be able to do about it.

If the contract is made subject to satisfactory DUE DILIGENCE search results at the discretion of the Buyer and the Buyer wishes to terminate the contract then he or she can do so (within the stipulated time frame) and receive their deposit back. The Contract is then terminated and the Buyer can find another property. This condition also affords the Buyer the opportunity to negotiate on the terms of the Contract while the contract is conditional.

Obviously this condition should not be abused but it certainly affords the Buyer an ‘opt’ out in genuine circumstances when the Buyer feels they should not proceed with the transaction.

What kind of Due Diligence searches should a Buyer do? There are many different types of searches a Buyer should consider but as an example a Buyer should make inquiries with the Local Council whether the Seller obtained all necessary Council approvals for the improvements erected on the property. If the improvements are not approved... Council may require the Buyer to go through the process of obtaining approval, which in this day and age could be a fairly costly exercise.

Be safe... request a Due Diligence clause be inserted into your Contract and have your conveyancing Solicitor or Conveyancing Lawyer do the Due Diligence searches for you.

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